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«Green inflation» as a new measure of climate change 

Фото Gustavo Basso / NurPhoto via Getty Images
Фото Gustavo Basso / NurPhoto via Getty Images
The urgency of solving the planet’s environmental issues is a hot topic. The reason is robust: unless we act soon, an irreversible environmental catastrophe will occur in the future

But does an appeal to save the planet right away motivate the relevant sponsors — officials and the wealthy? Not quite. The vagueness of the timing and scope of the environmental catastrophes weakens the motivation. «Soon» is not a convincing deadline.

One classic communication technique is to make the abstract concrete and relatable to the decision-makers. Can we convey the urgency more effectively? For example, the cost of delay could be expressed in terms of «purchasing power» or the «time value of money.» This would specify, in numerical terms and ideally as an annual percentage rate, how much less for the environment one dollar (adjusted for inflation) can do in a few years compared to the same dollar today.

Let’s call this rate «green inflation.» Reports and calculations on climate change are abundant, but finding such a simple number is all but simple.

 

In 2015, the World Economic Forum at Davos attempted to assess the cost of delaying climate change mitigation (based on 16 studies) as follows: (I) the cost of achieving a given target would rise by about 40% per decade, and (II) a delay that results in warming of 3° Celsius above preindustrial levels could increase economic damage by approximately 0.9% of global output annually. It is not easy to assemble a formula out of these two components: now vs. after achieving a 3°C increase, per decade vs. annually, cost of target vs. damage as percentage of GDP, cost increase vs. a fixed number. As a result, appreciating these figures is challenging. More importantly, this formula does not convey urgency. If the cost of delay is 40% per decade, that is much less than an average 10% annual growth of global stock markets. One might then infer from these numbers that, at least for the near future, it may be more efficient to invest funds in non-environmental projects and postpone solving the environmental issues until later. That conclusion, presumably, is far from the intended goal of the studies.

Later reports sound a louder alarm. A study by Kent Daniel of Columbia University, Robert Litterman of Kepos Capital and Gernot Wagner of NYU published in the Proceedings of the US National Academy of Sciences in October 2019 estimates that delays in implementing CO2 emissions pricing will trigger costs of intimidating magnitude: «In rough monetary terms, delaying implementation by only 1 year costs society approximately $1 trillion. A 5-year delay creates the equivalent loss of approximately $24 trillion, comparable to a severe global depression. A 10-year delay causes an equivalent loss in the order of $10 trillion per year, approximately $100 trillion in total.

For society’s sake: how to fix our information overload

Based on this study, let’s take the current fortune of the richest man in the world, Jeff Bezos, and assume that he applies all of it towards climate action, but in 10 years rather than today. In this scenario, even if he keeps the funds profitably invested, the purchasing power of his $185 billion today in terms of solving the planet’s issues will decrease during that period by almost 100 times to around $2 billion. A shocking result! Does this study go too far, or will the difference decrease in later years?

Any such number will necessarily be approximate and highly variable depending on the assumptions it is predicated upon. But while the planet does need measurement of some reasonable kind, it does not need scientific precision for this purpose. Rather, it requires an independent review of the most recent studies and effective communication from reputable organizations, such as the United Nations, the International Monetary Fund, the World Bank or the G20 Climate and Energy Joint Ministerial Session.

 

The world needs to be informed of the urgency loudly in a new, more tangible way. A number or a simple formula is needed that illustrates vividly the speed at which funds not applied to environmental issues today lose their value.

Such a «green inflation rate» will help galvanize politicians, billionaires, the media, and society as a whole, by demonstrating that the planet really can’t wait.

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Наименование издания: forbes.ru

Cетевое издание «forbes.ru» зарегистрировано Федеральной службой по надзору в сфере связи, информационных технологий и массовых коммуникаций, регистрационный номер и дата принятия решения о регистрации: серия Эл № ФС77-82431 от 23 декабря 2021 г.

Адрес редакции, издателя: 123022, г. Москва, ул. Звенигородская 2-я, д. 13, стр. 15, эт. 4, пом. X, ком. 1

Адрес редакции: 123022, г. Москва, ул. Звенигородская 2-я, д. 13, стр. 15, эт. 4, пом. X, ком. 1

Главный редактор: Мазурин Николай Дмитриевич

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AO «АС Рус Медиа» · 2022
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